American events to show the way for local traders

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The sharemarket will look to the US for a lead this week with little news on the domestic front, and the release of top-shelf data expected to confirm improvements in the US economy.

Both the US May industrial production figures and CPI data are expected to reflect a rapidly improving economy.

With the global scene stabilising, analysts said the local sharemarket was expected to strengthen over the next fortnight, supporting decisions to raise projections for 2004.

"We now expect the All Ordinaries to reach 3610 by the end of 2004, up from the previous estimate of 3550, [while] the ASX 200 is expected to lift to 3625 by year end," CommSec chief economist Craig James said.

After reaching record highs last week, the sharemarket coasted into the Queen's birthday holiday weekend with the benchmark ASX200 index closing 10.2 points higher at 3478.2 and the All Ordinaries up 9 points to 3478.1.

In the US, equity and bond markets were closed on Friday for Ronald Reagan's funeral.

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Local events that could influence investors include Prime Minister John Howard's announcement on energy policy tomorrow and the Australian Competition and Consumer Commission's findings on Pacific National's acquisition of Freight Australia.

Mr James said as well as the Reserve Bank bulletin, to be released on Thursday, investors would be watching for the release of May tourist arrival numbers and merchandise imports tomorrow and on Thursday respectively.

Imports, which closely track consumers and business spending and are considered a timely economic indicator, are expected to total $10.8 billion, similar to April's figures but 2 per cent higher in seasonally adjusted terms.

Macquarie Research said crucial data this week was the US inflation figures due out tomorrow. "Inflation is lifting and this might help remove some uncertainty as to what are the driving forces behind higher prices," it said.

On Wednesday, the US Federal Reserve will release its Beige Book survey of economic conditions, with most of the focus on the extent to which improvements in employment have filtered out to different sectors and regions of the US economy.

UBS said the Empire State and Philadelphia Fed indices due out tomorrow and on Thursday would give the first look at how manufacturing is faring in June.

The data was not expected to reveal any further moderation and may even rebound, UBS said.

"We expect no change in policy from the Bank of Japan on Tuesday and look for the Economic Union's CPI and industrial production [numbers] to both rise."

AMP Capital said with global sharemarkets improving, the Australian sharemarket should reach 3550 by year-end.

"Our assessment remains that the rebound in global share-markets we have seen since mid-May has further to go," AMP chief economist Shane Oliver said.

"However, while sharemarkets can move higher, rising US interest rates and the approaching US election are likely to constrain gains and make for a relatively volatile ride."